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Despite lower single digit growth in ASP on YoY basis, HMCL has registered a revenue growth of 21% YoY basis to Rs.97.24bn in line with our estimates of Rs.96.3bn backed by 2.8% ASP growth and 17.8% volume growth on YoY basis. EBITDA jumped by 47.9% YoY to Rs.13.62bn. vs est of Rs.13.54bn. Margin expanded by 250bps YoY/-6bps QoQ to 14.0% (adjusting to EV impact it was ~16%. EBIDTA/vehicle also jumped by 25% to Rs.9329/vehicle due to better mix. RPAT for the quarter jumped by 51% to Rs. 10.74bn vs (est Rs.13bn) due to overall improvement in profitability.

In mechanised segment company is investing around Rs.20bn in Tirupati plant to achieve potential revenue of Rs.100bn supported by micro level distribution strategy and customer aspiration for buying merchandise product and on the export front company is focusing more on key markets such as Mexico, Nigeria, Columbia and Bangladesh. HERO made changes in distribution in Nepal and Bangladesh to improve the sales.

Portfolio upgradation store modernization to support industry leading growth: The company is upgrading the showrooms, with expectations to upgrade at least 500 stores (out of a total of 6000) in the next 6 months. It has launched a new model in the 125CC segment XTREME 125R. With regards to Harley Davidson and Karizma, the supply chain capacity is being built and in Phase-I the company is aiming to produce 10,000 units per month and gradually ramp up. We believe that the company will benefit from the premiumisation trend that is happening in the industry. To recover lost market share, the company continues to focus on the entry-level and 125+CC segments.

Digitisation initiative will boost up the overall product reach: As technology is changing, HMCL is extensively using digital routes to target the audience and to enhance the consumer experience. This effort has started yielding results and conversion from online channels is now at 12.4%.

Outlook and Valuations: We expect HMCL to improve market share going forward due to its long term strategic plan like showroom revamp, upgradation of portfolio. Further we are positive on HMCL due to a lower threat to EV transition (scooter ~8% of overall volume),  scaling up the EV portfolio and entry into middleweight MC with HD-X440. We recommend ADD rating on the stock with TP of Rs.5364 (19x of Sep-FY25E EPS).

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SEBI Registration no.: INZ 000160131